A Guide To Rebuilding Your Credit

Millions of Americans file for bankruptcy each year, and there are millions more that probably should. Many individuals choose to struggle, fight and worry about their finances rather than take advantage of the tools the government has given them to get free of crushing debt and start fresh. At the Chicago bankruptcy law firm of Ledford, Wu & Borges, LLC, our lawyers offer a free consultation to help you determine what your next steps should be.

Through our history, we have identified five steps that each American who need to file for bankruptcy protection should take to protect and rebuild his or her credit rating.

  • Step 1: File for bankruptcy. At this point, missed payments, late payments and loan default have wrecked your credit rating. It is likely to be beyond repair without taking drastic measures. Bankruptcy allows you to eliminate a great deal of debt, protect the assets you need to successfully go forward and free up your limited resources to pay off any remaining debt. Soon after filing for bankruptcy, you can begin rebuilding your credit.
  • Step 2: Obtain new credit. In this challenging economy, bankruptcy has become commonplace. Lenders understand this. Shortly after the completion of your bankruptcy you will be eligible to obtain new credit. Of course, you might not be able to take advantage of promotional offers or low APRs, but these loans can help rebuild your credit. It is wise to apply for one or two small lines of credit, preferably secured credit cards with your current bank, to continue building your credit. It is important to remember the traps or pitfalls that led you into bankruptcy in the first place. You would be wise to avoid them.
  • Step 3: Consistently review your credit report. We have spoken several times on this website regarding the importance of monitoring your credit report. Errors or inaccuracies in this report can have devastating effects on other aspects of your life. Contact each of the three major credit reporting agencies each year to receive a free report. We recommend that you obtain one credit report every four months so that you can consistently monitor your credit.
  • Step 4: Start a savings plan. Even if you take $20 or $30 out of each paycheck and place it into savings, you'll end up with a fairly large sum of money at the end of the year. This is your "rainy day" fund. Once there is significant savings, use this "extra" money to take a trip or make large purchases that you would have otherwise put on a credit card.
  • Step 5: Live within your means. By far, the most important step that must be taken to protect yourself from seeing your debt spiral out of control is to live within your means. This might entail taking a hard look at your income versus your expenses. Maybe the most expensive cellphone plan is not necessary. Maybe you don't need all of the extra channels in your cable or satellite service. You should begin evaluating purchases from the standpoint of "wants" versus "needs."

Following a bankruptcy, you've been given a chance to make things right — to protect your finances and strengthen your financial future. It is important to take these steps seriously, and aggressively manage your money to ensure financial freedom in the future.

Contact Our Illinois Firm

Call 312-574-3327 or contact our offices by e-mail to discuss your options during a free consultation with an attorney.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.